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Downtime reduction in a loss scenario

We are often confronted with managers who are under the impression not to spend money on downtime reduction simply because their process(part) is not profitable yet. Underlaying this supposition are often two weakly founded assumptions:

  • Downtime reduction requires an investment
  • Downtime reduction has a poor Return On Investment

Only in very extreme cases these arguments are correct. For the vast majority, both statements are plainly wrong. Nowadays, to continuously improve your process and reduce downtime, methods and tools are available on a monthly fee. Not requiring any significant investment.

Take a look at the case below. This company has:

  • a turnover of € 37.751
  • fixed costs of € 27.248K
  • variable costs of € 12.248K
  • an estimated downtime of 32%

Given the current conditions this company results in a € 2.170K loss. If they only reduce their downtime from 32 to 26 percent this money losing company suddenly becomes profitable!

Let's say it takes a full year to realise the downtime reduction, while during that year they invest € 12K in continuous improvement tool ProMISe, including implementation and training. For every euro they invest they reduce their loss by 184 euro. That is a staggering 1:184 ROI ratio!

No matter what scenario you are in, we invite you to use our Return On Investment calculator and see the effects of downtime reduction in your specific situation.